13‐7 NES Financial Corp. V. JP Morgan Chase Bank, N.A.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, 2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the 3 City of New York, on the 20th day of February, two thousand fourteen. 4 5 PRESENT: 6 7 JOSÉ A. CABRANES 8 ROBERT D. SACK 9 GERARD E. LYNCH 10 11 Circuit Judges 12 ____________________________________ 13 NES Financial Corp., 14 15 Plaintiff‐Appellant, 16 17 ‐ v ‐ No. 13‐7‐cv 18 19 JPMorgan Chase Bank, N.A., 20 21 Defendant‐Appellee. 22 _____________________________________ 1 Appearing for Appellant: JEFFREY A. LAMKEN, (Robert K. Kry, 2 MoloLamken LLP, Washington, DC, Steven 3 F. Molo, of counsel), MoloLamken LLP, New 4 York, NY, for Appellant. 5 6 Appearing for Appellee: JOHN M. CALLAGY, (David I. Zalman, 7 Damon Suden, of counsel), Kelley Drye & 8 Warren LLP, New York, NY, for Appellee. 9 10 Appeal from a judgment following a bench trial, entered on November 30,
11 2012, in the United States District Court for the Southern District of New York
12 (Victor Marrero, Judge). UPON DUE CONSIDERATION, IT IS HEREBY
13 ORDERED, ADJUDGED, AND DECREED that the judgment in favor of
14 defendant JPMorgan Chase Bank, N.A. (ʺJPMorganʺ), except for that portion
15 dealing with the plaintiffʹs claim for breach of the contractual provision related to
16 ʺtrue‐upʺ payments, be and hereby is AFFIRMED; and that the portion of the
17 judgment denying plaintiff NES Financial Corporationʹs (ʺNESFʺ) claim for
18 breach of the provision related to ʺtrue‐upʺ payments be and it hereby is
19 VACATED and the cause is REMANDED for further proceedings consistent
20 with this Order.
21 We assume the partiesʹ familiarity with the facts and record of prior
22 proceedings, referencing them only as necessary to explain our decision.
2 1 I. Standard of Review
2 ʺOn appeal from a judgment after a bench trial, we review the district
3 courtʹs finding[s] of fact for clear error and its conclusions of law de novo.ʺ
4 Kreisler v. Second Ave. Diner Corp., 731 F.3d 184, 187 n.2 (2d Cir. 2013) (internal
5 quotation marks omitted). We review mixed questions of law and fact ʺde novo to
6 the extent that the alleged error is in the misunderstanding of a legal standard
7 and clear error to the extent the alleged error is in a factual determination.ʺ
8 Diebold Found., Inc. v. Commʹr, 736 F.3d 172, 174 (2d Cir. 2013).
9 II. Recovery for Breach of Contract
10 NESF argues that the district court improperly denied it recovery in
11 connection with its claims that JPMorgan breached the Share Purchase
12 Agreement (ʺSPAʺ), which the parties executed to effect NESFʹs purchase of JPEX,
13 a JPMorgan subsidiary. We disagree. NESF relies on the familiar rule that ʺ[a]
14 person violating his contract should not be permitted entirely to escape liability
15 because the amount of the damage which he has caused is uncertain.ʺ Tractebel
16 Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 110 (2d Cir. 2007). But it
17 is equally well established that this rule applies only in those situations where the
18 existence or fact – as opposed to the amount – of damages is ʺnot merely
3 1 speculative, possible, and imaginary, but . . . reasonably certain and [the damages
2 are] such only as actually follow or may follow from the breach of the contract.ʺ
3 Id. (quoting Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264,
4 266 (1886)) (internal quotation marks and emphasis omitted).
5 The district court did not find that NESF had suffered damages of an
6 indeterminate amount; it found that NESF had suffered either no damages at all,
7 or that the possibility that it would suffer damages at some future date was
8 speculative. The courtʹs November 28, 2012, Decision and Order indicates
9 variously that ʺNESF has offered insufficient evidence of any damages it may
10 have suffered,ʺ that ʺNESF did not present sufficient evidence to establish the
11 damages it claims attributableʺ to any breach, and that the damages NESF sought
12 were ʺunduly speculative.ʺ ECF No. 88, at 21, 39, 37 (emphasis added). We are
13 not persuaded that these factual findings were clearly erroneous and, in view of
14 the record and applicable law, we conclude that the court correctly declined to
15 award NESF any relief on its breach of contract claims.
4 1 III. Sufficiency of the Fraud Claim
2 NESF next disputes the district courtʹs ruling that it could not have
3 justifiably relied on a representation regarding the source of JPEXʹs client base
4 allegedly made during a pre‐closing meeting between executives of NESF, JPEX,
5 and JPMorgan. Because we are satisfied that the courtʹs decision as to the fraud
6 claim was correct under both New York and California law, we need not decide
7 which applies.
8 Whether a plaintiff pleading fraud justifiably relied on a misrepresentation
9 is generally a question of fact. See Schlaifer Nance & Co. v. Estate of Warhol, 119
10 F.3d 91, 98 (2d Cir. 1997) (applying New York law); Grisham v. Philip Morris
11 U.S.A., Inc., 40 Cal. 4th 623, 637, 54 Cal. Rptr. 3d 735, 745, 151 P.3d 1151, 1159
12 (2007)). In New York, courts are ʺparticularly disinclined to entertain claims of
13 justifiable relianceʺ when ʺsophisticated businessmen engaged in major
14 transactions enjoy access to critical information but fail to take advantage of that
15 access.ʺ Schlaifer Nance & Co., 119 F.3d at 98 (quoting Grumman Allied Indus. v.
16 Rohr Indus. Inc., 748 F.2d 729, 737 (2d Cir. 1984)) (internal quotation marks
17 omitted). In California, a fraud plaintiff will be denied recovery ʺ[i]f the conduct
18 of the plaintiff in the light of his own intelligence and information was manifestly
5 1 unreasonable.ʺ Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1240, 44 Cal. Rptr.
2 2d 352, 360, 900 P.2d 601, 609 (1995).
3 The district court found that, regardless of what was said during the
4 meeting in issue, ʺNESF was at least on notice prior to the acquisition of JPEXʺ of
5 the relevant, correct information. ECF No. 88, at 6. Because we conclude that
6 ʺthe district courtʹs account of the evidence is plausible in light of the record
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13‐7 NES Financial Corp. V. JP Morgan Chase Bank, N.A.
UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURTʹS LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION ʺSUMMARY ORDERʺ). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, 2 held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the 3 City of New York, on the 20th day of February, two thousand fourteen. 4 5 PRESENT: 6 7 JOSÉ A. CABRANES 8 ROBERT D. SACK 9 GERARD E. LYNCH 10 11 Circuit Judges 12 ____________________________________ 13 NES Financial Corp., 14 15 Plaintiff‐Appellant, 16 17 ‐ v ‐ No. 13‐7‐cv 18 19 JPMorgan Chase Bank, N.A., 20 21 Defendant‐Appellee. 22 _____________________________________ 1 Appearing for Appellant: JEFFREY A. LAMKEN, (Robert K. Kry, 2 MoloLamken LLP, Washington, DC, Steven 3 F. Molo, of counsel), MoloLamken LLP, New 4 York, NY, for Appellant. 5 6 Appearing for Appellee: JOHN M. CALLAGY, (David I. Zalman, 7 Damon Suden, of counsel), Kelley Drye & 8 Warren LLP, New York, NY, for Appellee. 9 10 Appeal from a judgment following a bench trial, entered on November 30,
11 2012, in the United States District Court for the Southern District of New York
12 (Victor Marrero, Judge). UPON DUE CONSIDERATION, IT IS HEREBY
13 ORDERED, ADJUDGED, AND DECREED that the judgment in favor of
14 defendant JPMorgan Chase Bank, N.A. (ʺJPMorganʺ), except for that portion
15 dealing with the plaintiffʹs claim for breach of the contractual provision related to
16 ʺtrue‐upʺ payments, be and hereby is AFFIRMED; and that the portion of the
17 judgment denying plaintiff NES Financial Corporationʹs (ʺNESFʺ) claim for
18 breach of the provision related to ʺtrue‐upʺ payments be and it hereby is
19 VACATED and the cause is REMANDED for further proceedings consistent
20 with this Order.
21 We assume the partiesʹ familiarity with the facts and record of prior
22 proceedings, referencing them only as necessary to explain our decision.
2 1 I. Standard of Review
2 ʺOn appeal from a judgment after a bench trial, we review the district
3 courtʹs finding[s] of fact for clear error and its conclusions of law de novo.ʺ
4 Kreisler v. Second Ave. Diner Corp., 731 F.3d 184, 187 n.2 (2d Cir. 2013) (internal
5 quotation marks omitted). We review mixed questions of law and fact ʺde novo to
6 the extent that the alleged error is in the misunderstanding of a legal standard
7 and clear error to the extent the alleged error is in a factual determination.ʺ
8 Diebold Found., Inc. v. Commʹr, 736 F.3d 172, 174 (2d Cir. 2013).
9 II. Recovery for Breach of Contract
10 NESF argues that the district court improperly denied it recovery in
11 connection with its claims that JPMorgan breached the Share Purchase
12 Agreement (ʺSPAʺ), which the parties executed to effect NESFʹs purchase of JPEX,
13 a JPMorgan subsidiary. We disagree. NESF relies on the familiar rule that ʺ[a]
14 person violating his contract should not be permitted entirely to escape liability
15 because the amount of the damage which he has caused is uncertain.ʺ Tractebel
16 Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 110 (2d Cir. 2007). But it
17 is equally well established that this rule applies only in those situations where the
18 existence or fact – as opposed to the amount – of damages is ʺnot merely
3 1 speculative, possible, and imaginary, but . . . reasonably certain and [the damages
2 are] such only as actually follow or may follow from the breach of the contract.ʺ
3 Id. (quoting Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205, 209, 4 N.E. 264,
4 266 (1886)) (internal quotation marks and emphasis omitted).
5 The district court did not find that NESF had suffered damages of an
6 indeterminate amount; it found that NESF had suffered either no damages at all,
7 or that the possibility that it would suffer damages at some future date was
8 speculative. The courtʹs November 28, 2012, Decision and Order indicates
9 variously that ʺNESF has offered insufficient evidence of any damages it may
10 have suffered,ʺ that ʺNESF did not present sufficient evidence to establish the
11 damages it claims attributableʺ to any breach, and that the damages NESF sought
12 were ʺunduly speculative.ʺ ECF No. 88, at 21, 39, 37 (emphasis added). We are
13 not persuaded that these factual findings were clearly erroneous and, in view of
14 the record and applicable law, we conclude that the court correctly declined to
15 award NESF any relief on its breach of contract claims.
4 1 III. Sufficiency of the Fraud Claim
2 NESF next disputes the district courtʹs ruling that it could not have
3 justifiably relied on a representation regarding the source of JPEXʹs client base
4 allegedly made during a pre‐closing meeting between executives of NESF, JPEX,
5 and JPMorgan. Because we are satisfied that the courtʹs decision as to the fraud
6 claim was correct under both New York and California law, we need not decide
7 which applies.
8 Whether a plaintiff pleading fraud justifiably relied on a misrepresentation
9 is generally a question of fact. See Schlaifer Nance & Co. v. Estate of Warhol, 119
10 F.3d 91, 98 (2d Cir. 1997) (applying New York law); Grisham v. Philip Morris
11 U.S.A., Inc., 40 Cal. 4th 623, 637, 54 Cal. Rptr. 3d 735, 745, 151 P.3d 1151, 1159
12 (2007)). In New York, courts are ʺparticularly disinclined to entertain claims of
13 justifiable relianceʺ when ʺsophisticated businessmen engaged in major
14 transactions enjoy access to critical information but fail to take advantage of that
15 access.ʺ Schlaifer Nance & Co., 119 F.3d at 98 (quoting Grumman Allied Indus. v.
16 Rohr Indus. Inc., 748 F.2d 729, 737 (2d Cir. 1984)) (internal quotation marks
17 omitted). In California, a fraud plaintiff will be denied recovery ʺ[i]f the conduct
18 of the plaintiff in the light of his own intelligence and information was manifestly
5 1 unreasonable.ʺ Alliance Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1240, 44 Cal. Rptr.
2 2d 352, 360, 900 P.2d 601, 609 (1995).
3 The district court found that, regardless of what was said during the
4 meeting in issue, ʺNESF was at least on notice prior to the acquisition of JPEXʺ of
5 the relevant, correct information. ECF No. 88, at 6. Because we conclude that
6 ʺthe district courtʹs account of the evidence is plausible in light of the record
7 viewed in its entirety,ʺ Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573‐74
8 (1985), we will not disturb it. And, in view of the applicable legal standards,
9 neither will we disturb the courtʹs conclusion that NESFʹs notice of the truth
10 under the particular facts presented by this case precluded it from relying on any
11 representation to the contrary.
12 IV. Claim for Certain ʺTrue‐Upʺ Payments
13 NESF also appeals the district courtʹs denial of its claim for breach of the
14 clause of the SPA that provided for JPMorgan to make ʺtrue‐upʺ payments to
15 NESF to compensate it for lost interest income on the balances of certain interest‐
16 bearing accounts that did not transfer to NESF at closing.
17 We review a district courtʹs interpretation of a contract de novo. VRG Linhas
18 Aereas S.A. v. MatlinPatterson Global Opportunities Partners II L.P., 717 F.3d 322, 325
6 1 (2d Cir. 2013). ʺWhere the parties dispute the meaning of particular contract
2 clauses, the task of the court is to determine whether such clauses are ambiguous
3 when read in the context of the entire agreement.ʺ Law Debenture Trust Co. of N.Y.
4 v. Maverick Tube Corp., 595 F.3d 458, 467 (2d Cir. 2010) (internal quotation marks
5 omitted). In doing so, ʺ[t]he court should read the integrated contract as a whole
6 to ensure that undue emphasis is not placed upon particular words and phrases,
7 and to safeguard against adopting an interpretation that would render any
8 individual provision superfluous.ʺ Id. at 468 (internal quotation marks and
9 citation omitted). ʺContract language is not ambiguous if it has ʹa definite and
10 precise meaning, unattended by danger of misconception in the purport of the
11 contract itself, and concerning which there is no reasonable basis for a difference
12 of opinion.ʹʺ JA Apparel Corp. v. Abboud, 568 F.3d 390, 396 (2d Cir. 2009) (quoting
13 Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d
14 1280, 1282 (1978)) (brackets omitted).
15 When we determine on appeal that a contract is ambiguous and that there
16 is insufficient extrinsic evidence of the partiesʹ intended meaning so as to leave
17 no doubt as to which interpretation of the contract a reasonable fact‐finder would
18 select, we may ʺremand for the trial court to consider and weigh extrinsic
7 1 evidence to determine what the parties intended.ʺ Collins v. Harrison‐Bode, 303
2 F.3d 429, 433 (2d Cir. 2002).
3 The district court appears to have based its decision on the wording of a
4 single sentence in the clause at issue. We fear this may have led the court to place
5 ʺundue emphasisʺ on the clause itself while rendering other language in the SPA
6 superfluous. See Maverick Tube Corp., 595 F.3d at 468. In light of additional,
7 relevant language in the schedule to the SPA regarding how the payments in
8 question are to be calculated, we cannot say that the contract language is
9 ʺunattended by danger of misconception in the purport of the contract itselfʺ
10 such that ʺthere is no reasonable basis for a difference of opinion.ʺ JA Apparel
11 Corp., 568 F.3d at 396 (brackets omitted). We therefore conclude that the
12 provision is ambiguous.
13 Because the record before us does not permit us to resolve this ambiguity
14 as a matter of law, we vacate the portion of the district courtʹs opinion dealing
15 with ʺtrue‐upʺ payments and remand to the district court for further proceedings
16 on that issue. See Collins, 303 F.3d at 433. On remand, the district court may
17 consider whether to permit the parties to submit additional extrinsic evidence in
18 support of their positions. Because it appears that the court has not already
8 1 addressed the issue, if the court concludes that NESF is entitled to relief on its
2 ʺtrue‐upʺ payments claim, it should also consider whether NESF may be entitled
3 to indemnification from JPMorgan under the SPA for fees and expenses related to
4 this portion of the litigation.
5 * * *
6 For the foregoing reasons, the judgment of the district court, except for that
7 portion dealing with the plaintiffʹs claim related to ʺtrue‐upʺ payments, is hereby
8 AFFIRMED. The portion of the judgment denying the plaintiffʹs claim for ʺtrue‐
9 upʺ payments is VACATED and the cause is REMANDED for further
10 proceedings consistent with this Order.
11 FOR THE COURT: 12 CATHERINE OʹHAGAN WOLFE, CLERK 13